Racial bias in home lending is helping fuel unrest in Milwaukee

by Michael Mata18 Aug 2016
The extensive civil unrest and rioting that followed Saturday’s fatal shooting by police of Sylville Smith has cast attention once again on the Milwaukee metropolitan area — one of the most segregated cities in the United States.

While numerous factors are responsible for the unrest in Milwaukee, it’s clear that racial and income bias in home lending is helping fuel the tensions, according to a report released on July 18 by the National Community Reinvestment Coalition (NCRC). The report found there are significant racial and income disparities in mortgage lending in Milwaukee, St. Louis, and Minneapolis.

"[The] report clearly shows the lack of mortgage lending in low- and moderate-income neighborhoods and predominantly minority neighborhoods," noted NCRC's president and CEO, John Taylor. "Without access to responsible mortgage credit and the opportunity to become a homeowner, the ability for working people to build wealth is severely curtailed.”
In the Milwaukee metropolitan area, many black residents are effectively stranded in neighborhoods beset by poor schools, poverty, and crime. This creates an atmosphere of distrust and resentment directed at law enforcement and the entire system.
In Milwaukee and St. Louis, the racial composition of a neighborhood is a strong predictor of mortgage activity. The NCRC study shows that lending is greater in neighborhoods with larger white than black populations. In the Milwaukee Metropolitan Statistical Area, whites represent 70% of the population and received the majority (81%) of the loans. African Americans represent 16% of the population, yet received only 4% of the loans.    
Segregation brings down property values and exacerbates crime and violence, the report stated. "Lenders and policymakers must take action to ensure that every credit-worthy borrower has equal access to fairly priced credit. Without that access, predators and scammers fill the gap, targeting their fraudulent and discriminatory lending practices on credit-worthy borrowers,” noted Bethany Sanchez, director of fair lending at the Metropolitan Milwaukee Fair Housing Council.


  • by Bob the Lender | 8/18/2016 12:10:32 PM

    Another bunch of bullshit. Why would ANY lender take on unnecessary risk and lend to higher risk clients (regardless of color). I deny poor risk white people all the time too. Underwriting guidelines are in place to mitigate risk and loss, and it applies across the board to everyone, regardless of race.

    Credit scores are a great predictor for example. If you have poor credit, you equal poor risk. If you have poor credit, how is that the lenders fault? High Debt-to-income ratio is high risk. If you don't make enough money, how is that the lenders fault? Low down payment is high risk. If you can't save for down payment, how is that the lenders fault?

    Lenders are in business to make money, not lose money. Remember, CRA mortgages (community reinvestment mortgages) that force lenders to lend a mandated portion of their mortgages to high risk members of their community are the poorest performing mortgages and significantly contributed to the real estate meltdown.

    Bottom line: No one is owned a home. prove you are worthy and lenders will line up all day long to lend to you.

  • by | 8/18/2016 1:01:50 PM

    Sir, I didn't see anything in this report saying anyone is owed a house or that the lenders should compromise on their lending standards.

    The report indicates that people of EQUAL economic status and creditworthiness do not get EQUAL treatment by lenders. Study after study over decades has documented disparate treatment of people and that race has entered the equation much of the time.

  • by Jobo Ohio | 8/18/2016 2:54:42 PM

    CRA Mortgages, and the program pushed through by Pelosi and others has merit in Utopia, but we are not there. It forces lenders to lend to high risk borrowers...force feeding dairy to a lactose intolerant market with already stringent lending guidelines. And as a former Bond Trader/Analyst with 2 decades in this business I know for a fact that when you look at credit scores, income and race there is less stability and more single earner/single parent households which limit the borrowing options for African Americans. It is NOT race. Money is money and defaults hit markets hard. If you had unfiltered access to the tranche performance data and the lending variables used for tracking, you would then have the necessary information to analyze and see that this is a systemic problem in many inner cities. I could write a book on this subject and do work with attorneys nationwide, provide free continuing education to first time-homebuyers, peers, and bankruptcy debtors. As I tell my classes, just because you qualify for a home doesn't mean you are ready to buy one...especially when many still have open collections, no down payment and no reserves in case of emergency. No one is entitled or owed a home, but need to be treated equally...and if you have access to look at Moody's, SEC or Bloomberg data and are able to understand it you will see where the delinquency lies.

    Race has never been an adverse factor in any financial or lending decision that I or any bank, lender, or broker office made during my 24 years. Borrowers need to educate themselves and understand their credit, costs involved, and their liability...and forget about those "rocket" mortgages. In this right now society, instant gratification and entitlement, borrowers need to save money and have a vested interest in their home. It's better for them in the long term, better for their communities and better for the market.


Is TILA-RESPA a good or bad thing long term?